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How to Slay Debt Like a Boss

By Lacey Frazier
Updated
Published

Hundreds of millions of Americans are part of the debt club - with most of the debt coming from student loans, mortgage loans, credit cards, or a combination.1 It's common and quite easy to join. You spent too much on the latest iPhone and couldn't cover your student loan payment, decided to take that road trip to see your favorite band, or little Liam decided he wanted to take up piano. It's easy to just pay with your credit card and think, "Eh. I'll pay it off next month". But what happens when next month comes with its own set of surprises? The debt piles up.

Before you realize it, you have thousands of dollars of debt weighing on your shoulders and anxiety from teetering on the edge of Debt Stress Syndrome (Truth; it's a real thing). It's no mystery what's causing you to have that helpless feeling in the pit of your stomach, and you can't sleep or eat. The time to act is now! Stop hitting the snooze button, go into full boss mode and slay that debt!!

Step 1: Pick your slaying strategy

The goal is to pay down ALL of your debt, obvi. But when it comes to paying off debt, you have a couple of options. There's a lot of math that could be done to determine which option saves you the most money in interest paid, but it may make sense to first ask yourself, "What is going to give me the most satisfaction?" Personally, I'm all about the feels (math wasn't my strong suit in school).

  • Option 1. Pay off the balance on your highest interest first. If you're a long-game person, this could be the option for you. It might take you longer to see major progress, but you're good with that because you know you're minimizing your interest.
  • Option 2. Pay off your lowest balance first. This gives you an immediate win. Accomplishing tiny goals are big steps forward to your major goal. If you're someone who likes to check things off of a list, this could be your option.
  • Option 3. Take out a debt consolidation loan.

Step 2: Slay away

Once you pick your strategy, it's time to get to work. Follow the steps outlined for your strategy below.

Slay strategy 1: Pay off the highest interest first

If you chose this option, here's what to do:
  1. Create a list of all of your accounts. Next to each account, list your interest rate.
  2. Sort your list by the interest rate so the highest interest rate is at the top, and the lowest interest rate is at the bottom.
  3. Take your account with the highest interest rate and start paying more than the minimum payment. Do whatever you can afford here - the more you pay, the quicker the debt will be paid off.
  4. DYK? With many forms of debt, minimum-only payments are typically applied to interest first; making it very difficult to make a dent in your principal balance (outstanding amount owed). And interest accrues based on your outstanding principal. If you don't pay down the principal amount, then basically, you're just making interest payments.
  5. Continue to pay the minimum balance on your other accounts with lower interest rates.
  6. Once you pay off the debt on your account with the highest interest rate, repeat steps 3 & 4 until you pay off all of your accounts. AKA the "snowball method". 2

Slay strategy 2: Pay off the lowest balance first

Now let's take a look at your balance as the priority rather than the interest rate. Start with the accounts with the lowest balance and work your way up to the accounts with higher balances. Even if the accounts have lower interest rates, paying them off can simplify your debt - we'll take that win!

  1. Create a list of all of your accounts. Next to each account, list your outstanding balance.
  2. Sort your list by the amount owed so that the lowest balance is at the top, and the highest balance is at the bottom.
  3. Take your account with the lowest balance and start paying more than the minimum payment. Do whatever you can afford here - the more you pay, the quicker the debt will be paid off.
  4. Pro Tip! To help you figure out how much more you can pay, try creating a budget. When I was getting used to this budgeting thing, my dad helped me manually build a spreadsheet to track every expense (it's eye-opening to know where your money goes when you track every cent!) But now, there are free budget templates online that can get you started. Even though I'm not under 30, I personally like this budget spreadsheet from Money Under 30.
  5. Continue paying the minimum balance on your other accounts with higher balances. Once you pay off the debt on your account with the lowest balance, continue working your way down the list by repeating steps 3 & 4 until you pay off all of your accounts.

Slay strategy 3: Consolidate your debt

Do you have multiple credit cards, loans, etc.? Let me guess: All have different payment dates and ways to pay, different balances, and varying interest rates? That's a lot to manage. If you are overwhelmed by all of this, you might consider a debt consolidation loan. A debt consolidation loan allows you to borrow one lump sum, at one interest rate, and use the loan proceeds to pay off your other outstanding debts. In essence, this simplifies your debt: One loan with periodic payments.

Here's how to go about a debt consolidation loan:

  1. First, list out all of your outstanding debts and the interest rate associated with each of them.
  2. Then, identify which debts you want to consolidate. Example: you may consolidate your student loans and credit card debt, but it might make sense to keep your car loan separate because it already has a lower interest rate.
  3. Do your research on loan options to see if you can find a debt consolidation loan with lower interest.
  4. Use the funds from the lower interest loan to pay off the debts you previously identified.
  5. Finally, pay back your lower interest debt consolidation loan according to the repayment schedule in manageable payments.

Try these debt hacks

As you are slaying your debt, keep these debt hacks in mind:

Download an app

While I haven't personally used these apps, they have great reviews! If you're looking for a tool to help keep you accountable, these could be a good start.

  • ChangEd - iPhone, Android - This app helps you payoff student loan debt by rounding up your purchases to the nearest dollar and then applying that change to your student loan.
  • Digit - iPhone, Android - This app helps you with a number of financial goals such as paying off student loan debt, credit card debt, creating an emergency fund, and more.
  • Clarity Money - Budget Manager - iPhone, Android - Similar to Digit, Clarity Money helps you manage your overall budget, debt and investments, and helps you make smart decisions.

Ask your credit card company to lower your interest rate

Do you have a credit card that you've had for several years? Have you made several on-time payments for the last several months? Call your credit card company and ask to lower your rate.3 You may not always hear "yes", but if you explain how you've been a loyal customer for so many years then they may lower your rate to keep you as a customer.

Be mindful of spending

Like a track on repeat, we've all heard, "Spend your money wisely". But this is especially important when you're trying to pay off debt. The last thing you want to do is keep racking up more and more debt (that is an endless, vicious cycle). So limit the use of your credit card(s) and try to put any extra money toward debt payments. Your FOMO may be on high alert for a bit, but it will be worth it in the end. You got this!

Sources:

1 Fay, Bill. (2019). "Demographics of Debt". In Debt.org. Retrieved from https://www.debt.org/faqs/americans-in-debt/demographics/

2 Latoya Irby. (2019, February 06). "Why It's Best to Pay Your Highest Interest Rate Credit Cards First". In thebalance.com. Retrieved from https://www.thebalance.com/pay-high-interest-cards-960825

3 Alford, Catherine. (n.d.). "15 Money Hacks to Pay Off Debt Faster Than Your Neighbors". Money Manifesto. Retrieved from https://www.moneymanifesto.com/15-ways-to-pay-off-your-debt-quicker-5793/

About
Lacey Frazier
Read more from Lacey
Growing up in a family with four very active and involved kids, money was often tight. I was raised to be smart with money by picking up tips on how to spend wisely, pinching pennies where I can, and finding good deals. I love a glass of good wine and a plate of greasy tacos as much as I enjoy sharing the lowdown on getting the most out of every hard-earned dollar. Cheers!

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